With the new year upon us, now is a good time to assess what key financial changes may affect you in 2014.
Social Security & Medicare
If you’re one of the 63 million Americans receiving Social Security benefits, you‘ll see a 1.5 percent increase in your benefit payments beginning this January, due to an annual cost-of-living adjustment.
If you’re under full retirement age and simultaneously collecting Social Security benefits and working, your benefits will be reduced by $1 for every $2 you earn over $15,480 a year, or $1,290 a month. This “retirement earnings test exemption amount” allows $350 more in earnings a year without penalty than in 2013. If you reach full retirement age in 2014, your benefits will be reduced $1 for every $3 earned over $41,400 for the year, an increase of $1,320. The maximum monthly Social Security benefit is $2,642 in 2014, up from $2,533 in 2013.
Your Medicare Part B insurance and deductible costs will remain the same; however, the Part A hospital inpatient deductible has been raised $32 for each benefit period or hospital stay.
You can contribute up to $17,500 in your employer-sponsored retirement plan (401(k), 403(b) or 457(b) plans), a limit that is unchanged from 2013. Similarly, your individual retirement account (IRA) contributions are capped at $5,500, the same level as last year. “Catch-up” limits will also remain steady, allowing you to contribute an additional $5,500 contribution to your retirement plan, and $1,000 to IRAs, if you are 50 years of age or older.
If you participate in a health savings account (HSA), the annual maximum contribution in 2014 will increase to $3,300 for individuals and $6,550 for families.
As for tax changes for 2014, there is a slight upward modification of tax brackets, with the personal exemption amount increasing from $3,900 to $3,950. Other increases include a bump in the maximum taxable earnings for Social Security taxes to $117,000, an increase of$3,300 over 2013. The Alternative Minimum Tax (AMT) exemption amount and corresponding exemption phase out threshold has increased slightly while the annual gift tax exclusion remains at $14,000 for individual gifts, or $28,000 for joint gifts.